Leading the New Financial System

Transcription

1 Leading the New Financial System Banking & Insurance CEO Conference Ángel Cano President & COO London, 28th September

2 Disclaimer This document is only provided for information purposes and does not constitute, nor must it be interpreted as, an offer to sell or exchange or acquire, or an invitation for offers to buy securities issued by any of the aforementioned companies. Any decision to buy or invest in securities in relation to a specific issue must be made solely and exclusively on the basis of the information set out in the pertinent prospectus filed by the company in relation to such specific issue. Nobody who becomes aware of the information contained in this report must regard it as definitive, because it is subject to changes and modifications. This document contains or may contain forward looking statements (in the usual meaning and within the meaning of the US Private Securities Litigation Act of 1995) regarding intentions, expectations or projections of BBVA or of its management on the date thereof, that refer to miscellaneous aspects, including projections about the future earnings of the business. The statements contained herein are based on our current projections, although the said earnings may be substantially modified in the future by certain risks, uncertainty and others factors relevant that may cause the results or final decisions to differ from such intentions, projections or estimates. These factors include, without limitation, (1) the market situation, macroeconomic factors, regulatory, political or government guidelines, (2) domestic and international stock market movements, exchange rates and interest rates, (3) competitive pressures, (4) technological changes, (5) alterations in the financial situation, creditworthiness or solvency of our customers, debtors or counterparts. These factors could condition and result in actual events differing from the information and intentions stated, projected or forecast in this document and other past or future documents. BBVA does not undertake to publicly revise the contents of this or any other document, either if the events are not exactly as described herein, or if such events lead to changes in the stated strategies and intentions. The contents of this statement must be taken into account by any persons or entities that may have to make decisions or prepare or disseminate opinions about securities issued by BBVA and, in particular, by the analysts who handle this document. This document may contain summarised information or information that has not been audited, and its recipients are invited to consult the documentation and public information filed by BBVA with stock market supervisory bodies, in particular, the prospectuses and periodical information filed with the Spanish Securities Exchange Commission (CNMV) and the Annual Report on form 20-F and information on form 6-K that are disclosed to the US Securities and Exchange Commission. Distribution of this document in other jurisdictions may be prohibited, and recipients into whose possession this document comes shall be solely responsible for informing themselves about, and observing any such restrictions. By accepting this document you agree to be bound by the foregoing Restrictions. 2

3 Superior performance of BBVA Group H10 (Base 100: 2002) (Base 100: 2007) Macro (World GDP) Sovereign risk Fiscal consolidation Liquidity crunch Financial system (Attributable profit peer group*) Credit quality deterioration Funding constraints BBVA Group (Attributable profit) Record gross margin Risk indicators stabilize Access to liquidity Solvency confirmed by stress-tests and S&P * Peer Group: BARCL, BNPP, CASA, CMZ, CS, DB, HSBC, ISP, LBG, RBS, SAN, SG, UBS & UCI. 3

4 and leadership in terms of profitability ROA BBVA Group & peer group* (1H10, %) ROE BBVA Group & peer group* (1H10, %) BBVA Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 Peer 8 Peer 9 Peer 10 Peer 11 Peer 12 Peer 13 Peer Peer 1 Peer 2 BBVA Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 Peer 8 Peer 9 Peer 10 Peer 11 Peer 12 Peer 13 Peer * Peer Group: BARCL, BNPP, CASA, CMZ, CS, DB, HSBC, ISP, LBG, RBS, SAN, SG, UBS & UCI. 4

5 Why do we outperform our peers? Why will we continue to do so? 1 Superior business model: source of differentiation 2 Bank transformation focused on superior future growth 5

6 1 Superior business model: source of differentiation Superior business model based on: Three key differentiation elements 1. Customer 2. Efficient distribution 3. Technology 4. Diversification A. Recurrence B. Structural strength C. Ability to anticipate 5. Prudence 6

7 Our customer-focused business model 1. Customer 2. Efficient distribution 3. Technology 4. Diversification 5. Prudence Customer-based banking model with a leading position in our main markets Customer-based revenues: 91%* of total revenues Retail banking leader in all our franchises 46.9 million customers 7,407 branches A global WB&AM franchise 3,800 employees (1,900 Europe, 1,800 America and 100 in Asia) 25 countries USA Leader franchise in the sunbelt Mexico Market Leader South America 1st/2nd Spain 1st/2nd Asia / China Strategic alliance * Customer based revenues = BBVA Group gross income (corporate activities + no clients income from WB&AM) 7

8 with a very efficient distribution network 1. Customer 2. Efficient distribution 3. Technology 4. Diversification 5. Prudence Spain Mexico Latam Market share (%, June 10) Market share (%, June 10) Market share (%, June 10) +39% +64% +27% 7.8% 10.9%* 17.3% 28.5%* 7.9% 10.0%* Branches Business Branches Business Branches Business *Lending + customer funds Efficient networks are key factor given their weight in the cost structure 8

9 important leveraging of technology 1. Customer 2. Efficient distribution 3. Technology 4. Diversification 5. Prudence Expenditures on technology BBVA Group* ( m) Change-the-bank vs Run-the-Bank (Capex vs total costs) 1,243 1,495 1,529 39% 27% * Include investment + incurred expense excluding depreciation. BBVA 2009 Source: BCG and in-house. Avg. global competitors

10 well diversified 1. Customer 2. Efficient distribution 3. Technology 4. Diversification 5. Prudence Gross income* Breakdown by business area (%) USA 13% South America 18% Mexico 26% Spain & Portugal 34% Emerging economies WB&AM 9% Developed economies 46% 54% and finally prudence, the fundamental principle of our management * Excl. corporate activities 10

11 1 Superior business model: source of differentiation Superior business model based on Three key differentiation elements 1. Customer 2. Efficient distribution 3. Technology 4. Diversification A. Recurrence B. Structural strength C. Ability to anticipate 5. Prudence 11

12 A. Recurrence: as a result we enjoy recurrent high-quality gross income Gross income BBVA Group Quarter-by-quarter ( m) Gross income / ATAs BBVA Group vs peer group* (%) A. Recurrence B. Structural strength C. Ability to anticipate +8.0% 5,166 5,301 5, % Average 1Q10 2Q H10 BBVA Peer Group ex BBVA Record quarter High profitability of our balance sheet * Peer Group: BARCL, BNPP, CASA, CMZ, CS, DB, HSBC, ISP, LBG, RBS, SAN, SG, UBS & UCI. 12

13 that along with continuous progress in efficiency leads to strong operating income Cost to income BBVA Group & peer group (1H10,%) Operating income BBVA Group (1H10, m) A. Recurrence B. Structural strength C. Ability to anticipate BBVA Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 Peer 8 Peer 9 Peer 10 Peer 11 Peer 12 Peer 13 Peer % 42.2% 45.0% 49.3% 55.7% 56.3% 57.1% 58.6% 58.9% 59.7% 60.6% 65.9% 70.1% 70.9% 72.4% +15.0% +3.3% 6,293 6,500 5,472 1H08 1H09 1H10 Leadership in efficiency * Peer Group: BARCL, BNPP, CASA, CMZ, CS, DB, HSBC, ISP, LBG, RBS, SAN, SG, UBS & UCI. 13

14 improving our relative position during the crisis Share of operating income vs. share of total assets BBVA Group vs. peer group* (%) A. Recurrence B. Structural strength C. Ability to anticipate Share of operating income Share of total assets Improvement in market share of operating income while keeping total assets stable * Peer Group: BARCL, BNPP, CASA, CMZ, CS, DB, HSBC, ISP, LBG, RBS, SAN, SG, UBS & UCI. 14

15 B. Structural strength A. Recurrence B. Structural strength C. Ability to anticipate Risk management Decentralized risk, liquidity and capital management model Solvency Funding 15

16 Risk management Gross additions to NPA: -14.8% Monthly average, 2010 vs 2009* NPA ratio BBVA Group (%) A. Recurrence B. Structural strength C. Ability to anticipate Net additions to NPA: -56% Monthly average, 2010 vs 2009* Recoveries: +37% Monthly average, 2010 vs 2009 Jun.09 Sep.09 Dec.09 Mar.10 Jun.10 Cost of risk excl. one-offs BBVA Group Quarter-by-quarter (%) 1,16 1,04 1,33 1,24 1,53 1,21 2Q09 3Q09 4Q09 1Q10 2Q10 32 bp Additional 250m added to generic provisions * Excl. anticipation Stabilization and improvement in main risk indicators 16

17 Solvency: according to CEBS stress test BBVA is one of the most resilient entities in Europe Impact of stress test over TIER I (In basis points) Peer 1 Peer 2 BBVA A. Recurrence B. Structural strength C. Ability to anticipate Maximum resilience of capital ratio despite the tough test scenario used for Spain Peer 3-10 Peer 4 Peer Ability to generate net operating income Peer 6-60 Peer 7-70 Peer 8 Peer 9 Peer 10 Peer Adequate solvency and payment of cash dividends in stress scenarios in the absence of capital increases Peer Standard & Poor s has confirmed AA rating Organic generation capacity demonstrated quarter by quarter * Peer Group: BARCL, BNPP, CASA, CMZ, DB, HSBC, ISP, LBG, RBS, SAN, SG & UCI. 17

18 Funding: solid liquidity and finance positions Deposit / Assets (1H2010, %) BBVA Group s wholesale maturities ( bn) A. Recurrence B. Structural strength C. Ability to anticipate Peer 1 Peer 2 BBVA Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 Peer 8 Peer 9 Peer 10 Peer 11 Peer 12 Peer 13 Peer Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 Peer 8 Peer 9 Peer 10 Peer 11 Peer 12 Peer 13 Peer 14 BBVA >2010 Source: Bloomberg September, 6, 2010 High deposit base and a smaller balance sheet than any peer Less dependent on wholesale debt rollover in the medium term * Peer Group: BARCL, BNPP, CASA, CMZ, CS, DB, HSBC, ISP, LBG, RBS, SAN, SG, UBS & UCI. 18

19 C. A history characterized by anticipation Two types of anticipation A. Recurrence B. Structural strength C. Ability to anticipate Tactical anticipation Structural anticipation Short term performance Sustainability & evolution of the model 19

20 Tactical anticipation: recent examples Funding position Credit quality A. Recurrence B. Structural strength C. Ability to anticipate Wholesale funding LT wholesale finance budget covered in advance Retail funding Customized prices vs. massive price campaigns Selective growth Anticipate future deterioration Comfortable position and access to the markets Resilience of net interest income Market share gains Superior NPA evolution 20

21 Structural anticipation: Spain Planned quota loss (since pre-crisis) Transformation plan (2007) A. Recurrence B. Structural strength C. Ability to anticipate New recovery process (2007) BBVA s lending share in Spain (%) Branches in Spain Recoveries process redesign in Spain 13.26% 12.52% 12.01% 11.61% 34,879 3,635 System ex BBVA 35,589 BBVA 3, Source: BBVA and Bank of Spain H10 Market share of recurrent operating income*: 33.0 % (+10.7 pp in the last two years) * Recurrent operating income= operating income ex net trading income. Peers: Caixa, Caja Madrid, Popular, Sabadell & Santander 21

22 Structural anticipation: Mexico Proactive change of the portfolio mix A. Recurrence B. Structural strength C. Ability to anticipate Loan portfolio* (Mix, %) Net interest margin* (loan portfolio) (Mix, %) Dec.07 Jun.10 Commercial Consumer Mortgages Jun.08 Jun.10 Commercial Consumer Mortgages while increasing our share of recurrent operating income** share: 37.2 % (+2.6 pp in the last two years) * Local data Mexico. ** Recurrent operating income= operating income ex net trading income. Peers: Banamex, Banorte, HSBC y Santander. 22

23 Why do we outperform our peers? Why will we continue to do so? 1 Superior business model: source of differentiation 2 Diversification Growth potential Bank transformation focused on superior future growth 23

24 Better diversification: portfolio mix biased towards high growth economies Present Future ? Potential growth of emerging economies and optimization of franchises in mature markets 24

25 Growth plan based on three pillars A. Customer B. Distribution C. Processes with three clear objectives Market share growth Productivity improvement and new relationship model with our customers Low cost production Superior customer experience and with technology as a facilitator 25

26 And, what can we expect from each business unit as a result of this plan? Spain & Portugal Market share gains Mexico Growth through bancarization and increased capillarity South America USA Key driver of Group growth through efficiency and high value segments Increase contribution and relative weight within the Group through implementation of BBVA model WB&AM Growth based on two pillars: product & geography 26

27 Spain, ongoing stabilization in macro terms... Recovery symptoms and fiscal consolidation in progress 3.6 Spain GDP growth (%) Measures Discretionary measures Increase in revenues Immediate action plan Reduction of public deficit in 2 years (% of GDP) +2.7 % +1.0 % +0.5 % -0.5 Adjustment plan submitted to the EC +1.5 % (e) (e) Source: BBVA Research Cyclical impact on deficit -0.5 % 5.2 % Structural reforms on track (labour market, pensions ) Deficit will fall from 11.2% to 6.0% of GDP in 2 years (to 3.0% by 2013: -7,2 pp) 27

28 and many opportunities we are already exploiting Opportunity Market share gain* (Jul.10 vs Dec.09) Domestic deposits: +33 bp Domestic lending: +103 bp Competitors weaknesses 1. Consolidation process 2. Funding constraints Superior performance of Net interest income Net interst income y-o-y growth 1H10 / 1H09 (%) 0.6 BBVA Spain & Portugal Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 Superior performance of risk indicators NPA ratio Local peer group Variation Jun10 / Dec09 (Basis points) Peer 1 BBVA S.A Peer 2 Peer 3 Peer 4 Peer 5 Peer Peer 7 65 *Other domestic lending and other domestic deposits 28

29 Mexico: positive perspectives from the macro standpoint Mexico GDP growth (%) Growth rates that 1.5 will soon lead to higher earnings (e) (e) Source: BBVA Research 29

30 and many growth opportunities Opportunity High weight of informal workers in occupied labor Low banking penetration Low utilization of banking services 22 million potential customers Main lines of action Bancarization Increased capillarity 30

31 South America: high potential growth South America* GDP growth (%) Dynamism of a region that continues to be an important source of Group growth (e) (e) Source: BBVA Research *Argentina, Brazil, Chile, Colombia, Peru and Venezuela Source: BBVA Research 31

32 and opportunities to upgrade the franchise and grow at full potential Opportunity Mass affluent and affluent Efficiency Profitability of an average affluent customer is 7.8 times that of the average typical customer Unattended affluent and corporates segment % FTEs devoted to sales Spain South America 61% 44% Main lines of action High value segments Crucial process optimization 32

33 USA: several growth niches for our franchise USA GDP growth (%) Despite uncertainty the USA is leading 0.0 global recovery (e) Source: BBVA Research (e) 33

34 with a clear goal: to increase its contribution to 15% of BBVA s net income Opportunity Sector consolidation: reduced competition Re-intermediation of financial services by banks Cross-border business Corporate banking High value customers Main lines of action Customer acquisition and saturation Distribution restructuring New IT platform 34

35 WB&AM: good opportunities and already delivering results Opportunity A. More global Percentage of non-spanish Income (%) 40% 59% Geographies U.S. Asia Product / segment Institutional customers Global fixed-income FX & transactions B. Greater customer penetration First 3 top-of-mind* (%) H10 57% 62% H10 Added value income C&IB (%) 38% 42% * Spain and Latam ex Brazil * * Commissions + Net trading income H10 35

36 In conclusion: a valuable investment opportunity 1 Superior business model: source of differentiation Recurrence Structural strength Ability to anticipate 2 Bank transformation focused on superior future growth Diversification Growth potential Capacity and determination to lead the future financial system 36

37 Leading the New Financial System Banking & Insurance CEO Conference Ángel Cano President & COO London, 28th September